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Commodities, ranging from precious metals to oil and agricultural products form a central part of our society and economy. As such, they play a key role in the sustainable transition, which explains the growing importance of incorporating ESG in commodity trading.
On the one hand, many commodities are driving the green transition, which transfers into an increasing demand for commodities that promote clean energy, like green lithium, as well as sustainably sourced and ethically produced commodities such as responsible cocoa or palm oil.
On the other hand, commodities can also be negatively affected by the green transition through physical risks like climate-related extreme weather events destroying agricultural products and a decreasing demand for commodities which do not support or are negatively affected by the green transition such as fossil fuels. Furthermore, ESG breaches result in financial losses, reputational damage and litigation costs.
There are increasing calls from the regulators and the industry for more ESG integration in the commodity business.
Clearly, the financial industry also has its role to play in the sustainable transition. As financial institutions are facing a true green regulatory tsunami, they’re passing their own obligations to other stakeholders in the commodity trading market, which will have tremendous implications for the crucial funding for commodity trading.
One of the core regulatory developments around sustainable finance is the EU taxonomy. It has implications on various areas around commodities and commodity trading such as:
Moreover, the taxonomy plays a key role in the greening of the commodity business.
Without a doubt, the taxonomy will shape the commodity business and at the same time can be a powerful tool for greening your commodity business. A successful implementation comprises the following four steps:
«Considering the strong interdependencies between commodities and the green transition, there is no way around thoroughly incorporating ESG in commodity trading.»
Dr Antonios Koumbarakis
Sustainability & Strategic Regulatory Leader, PwC Switzerland
We help you set up a sound roadmap to greening your commodity business, including:
Strategic impact assessment – Understand how your business is affected by ESG…
Regulatory impact assessment – …and by related regulatory developments
Taxonomy screening, alignment and classification of commodities and trading activities
Integration of sustainability risks on commodity trading into risk management
Definition of sustainability targets and commitments in relation to commodity trading
Disclosures on ESG matters and taxonomy-aligned activities.
Partner, Sustainability & Strategic Regulatory, PwC Switzerland
Tel: +41 58 792 45 23
Partner, Investor Reporting and Sustainability Platform Leader, PwC Switzerland
Tel: +41 58 792 25 37
Operational Excellence & ESG Transformation Leader, PwC Switzerland
Tel: +41 58 792 26 50
Director, Legal, PwC Switzerland
Tel: +41 58 792 28 86
Senior Manager, Sustainability Regulation Corporates, PwC Switzerland
Tel: +41 78 696 32 11
Senior manager, Sustainability & Strategic Regulatory, PwC Switzerland
Tel: +41 58 792 26 87
Senior Manager, Insurance Transformation, PwC Switzerland
Tel: +41 58 792 19 13